Student loans and allowances grow by 6.9% and 16.4% respectively in 2010 while debt reduction ability contracts. Your experience?

Student loans and allowances grow by 6.9% and 16.4% respectively in 2010 while debt reduction ability contracts. Your experience?

By Amanda Morrall

New Zealand students borrowers, graduating on average close to $26,000 poorer, are growing in number and taking on an ever increasing amount of debt.

Statistics New Zealand reported today that the number of students taking out loans in 2010 grew by 6.9% from 2009, with allowances increasing by 16.4% over the same time period.

Students last year borrowed an average of $7,300, roughly $310 more than in 2009, the "largest annual increase in amounts borrowed since the student loan scheme began."

Last year, 45.6% of students (93,942) took advantage of the student loan system, up from 42.5% in 2009.

Industry and labour statistics manager Diane Ramsay said student borrowers (whose cumulative debt now tops NZ$12 billion) are growing mainly as a result of increase in fees at university.

As students are digging deeper into debt, their ability to repay it is shrinking.

Statistics New Zealand also noted that first-year income for those leaving study in 2009 was down 4.5, compared to leavers in 2008.

The department said the decrease in income (most acutely felt by leavers aged 20-24 whose income levels plunged 7%) reflected the impact of the recession on the labour market.

The New Zealand Union of Students’ Associations (NZUSA) said that as well as being financially and psychologically crippling, debt levels were a main driver for graduates leaving the country to look for higher paying work.

The NZUSA, in its 2010 Income & Expenditure Survey 2010, found that student loans played a major part in:

• Deciding when and whether to go overseas (69% and 62%)
• Deciding when and whether to have children (45% of respondents, and 24% respectively)

Additionally, the survey found that the highest perceived negative economic effects included the ability to buy a house (72%), and saving for the future (65%).

“The issue of this massive $12 billion student debt must be addressed. Just as many are now suggesting the country cannot afford to ignore the superannuation debate much longer, we also can’t afford to let the student debt mountain keep growing,” the NZUSA co-president David Do has warned.

While income for new graduates is declining, the prospects are still better than for those whom drop out, reports Statistics New Zealand.

"Income of graduates who left study in 2005 who were aged 20–24 years had increased by 41.0 percent by 2010, whereas income of those who did not complete their qualification increased by 31.9 percent. By 2010, those graduates were receiving on average 27.7 percent more income than their counterparts who had not completed their qualification ($45,240 compared to $35,430, respectively)."

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

We welcome your comments below. If you are not already registered, please register to comment.

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.


$12 billion in cumulative debt ... it's just a joke that that sum is considered an asset in terms of our books. I wonder if that could be broken down into debt owed by those still here vs debt owed by those no longer living in NZ.

To me it's very short sighted not to offer a form of student debt write off based on tax paid while working in NZ post graduation.  Not doing so risks losing the prospective new tertiary qualified taxpayers overseas in addition to raising the risk of never being able to collect should they not return. 

The amount written off could increase as a percentage of tax paid if the qualification is considered in short supply - a policy that would make students think more strategically about what they study as well.


Too much is made of the student debt issue. Over lifetimes earnings (or even 10y worth of earnings) average debts are not a huge amount.

It was silly to make loans interest-free and the predictable outcome has occured, ie. everybody maxing out. Australia has a student loan interest rate set to CPI, which is hardly an unfair outcome.

Regarding people going offshore, the reality is NZ is a small country and isn't creating the numbers of jobs for graduates (perhaps outside of the public sector.).

So what if people go offshore, we need to structure the economy in such a way that people can bring their skills obtained offshore back home and contribute to the local economy.

Good points robby217. I am in Finland at the moment, but will probably return to New Zealand in the future with good experience and plenty of euros in my account. Is this a bad thing? Sounds like a win win to me.

My $50,000 student loan was repaid in 3 years and my salary is three times the NZ average (which is pretty good since I am only 27). Further, I am saving/investing more than the average NZ wage every year...

Student loans are not a bad thing. Without them I would not have had the opportunity I have had. The problem is the interest free component, because short sighted people exploit them for very short term gains. This is made worse if they fail to get their degrees, pass with poor grades, or study in a area where there are no jobs...  

Student loans are a good idea. They give everyone the ability to borrow to invest in their own education.

Student allowances are not a good idea. They give the kids of business people, farmers, and those working overseas money for nothing, and they never have to pay it back.

People talk about wasting money on interest-free student loans. I think we waste more giving student allowances to anyone who over 25, or whose parents can hide their income.

One thing I would like is that university/polytech/wananga funding was tied to the amount that was paid back by their respective students. It would discourage the $4000 student loan and get a free laptop courses that were abundant back when Labour was in charge.

Actually many of those "diploma in sweet bugger  all" courses popped up in the 90's when national opened up funding to the private sector. If you look around you can still see these institiutions littering most business districts. You know crappy management or design academy's and the like. I had a friend at the time who worked for an outfit in welly run by a couple of shysters that had a winz contract to run motivation and c.v courses for winz out of a motel conference centre for goodness sake! what a joke. All the waste on substandard courses that leave their so called graduates with dept and no career path have been around since well before the Clark years. 

There is a definite lack of critical thinking behind many of the comments here and on the education system. I kind of have to put that down to many posters prior education in wooly arts subjects, like economics.

I agree with the few commentators around the world who refer to a "higher education bubble".

There is such a thing as more degrees that there are jobs for those specialties.

There is also such a thing as specialties which are "wealth consuming", not wealth creating.

I pick that far too many starry-eyed youngsters pick degrees that qualify them for "wealth consuming" specialties (eg bureaucratic McJobs). I think they should work in the real world and pay into a kind of "tertiary education savings account" for a few years before they qualify for a loan. Then they might make better choices for their future than when they were a silly 17 year old fresh out of the politically correct cotton-wool-lined public education system.

I also think that a system should be set up whereby student loans come from private investors who get to hold a "bond" secured over the future income of the student they are funding. If a potential student can't convince an investor that he/she has good future earning prospects, they don't get to borrow money to go to Uni, end of story.

If you don't like this, then all your talk of NZ "benefitting" from the funding of tertiary education rings hollow - it is more about an entitlement to waste time (the student's own) or at best, indulge one's fancies; and waste society's scarce resources.

Agree. And Unis & Polys should be obliged to prove that they have a significant component of 'real-world' immersion & connection with industry throughout their degrees. Some of the written/verbal math levels of school-leavers is more akin to some post-apocalyptic barbaric society than a supposedly first world nation.  

Bonding a good idea.  Business incubators also to encourage tech, export, productive work harnessing the brains of tertiary provider, businesses and young trainees....       

The tertiary 'Bubble' could easily be 'disintermediated' with smart providers connecting young people into industries without the $30,000 debt etc.

Internationally it is common for students to recieve scholarships and hands on experience from firms in exchange for several years service post graduation, and I'm talking about your average student undergraduate not just super brain phd students. Where are the fonterra'a and a like willing to invest in their future workforce.  Of course in many area's there are very few high tech firms that can provide these oppertunities.

Yes some good points. But I would caution on who gets to define "real world"?

Plenty of people trained in construction in the US could legitimately argue they were learning real-world skills and are now on a scrap-heap.

Perhaps the focus could also be on reducing the number of industries that create what are basically nothing more than barriers to entry. Perhaps it could go full circle to past eras where people interested in a given career are trained more or less on the job from a young age.

There is somewhat of a paradox in todays world where managers who barely got school C, now occupy positions where anyone younger who tries to apply is expected to have at least a Masters etc.

Charles Murray points out the irony that many degree holders in the USA are unemployed or working at McDonalds, when many unqualified people, including immigrants, are making a  good living doing some in-demand trade, and without student debt.

If the average student can't afford to pay back a loan of $26,000, then there's something wrong - with the student! A $26,000 loan wouldn't even buy you a brand new car, well with most models it wouldn't.

And don't even get me started on the favourable terms of a student loan. Let's get real here.

It appalls me too , DB ..... that these namby pamby socialist parasitic students are moaning about their student loans ....... they get 'em interest-free ! So that means the battlers on struggle street NZ are supporting these self-indulgent delusional commies ......

.... honest to goodness bankers are losing out on the business of loaning money to those students , 'cos big fat arse nanny-state knows best ....

Who pushes the gun into their lily-white B.O. stinky student chests and says , " take out a loan , go ahead , you won't have to pay "  ? ...... they take a loan on their own volition ..... at the taxpayers' expense . And at the opportunity cost of business for the hard working bankers of this fine land , girt by sea .

... I am appalled , really appalled ..

"...growing mainly as a result of increase in fees at university"
This annual bitching session will not go away so long as the plan is to inflate a way out of debt.
The structural farce that has a handful of fools deciding what the 'higher salaries' will be, and the blatant greed evident everywhere which gives rise to grossly bloated pay packs for the likes of state tv bosses.
In a decade the debts will total 25billion and the same noise will fill the threads.
People have to realise they live in a really, it is one big fat stupid game...a game kept going by the bankers and the idiots in the Beehive pretending to govern.
Sit back and laugh...the game will go on until it stops...when it stops you will be visiting a soup kitchen.

Delete "Students"....NZ mired deeper in debt.....yup that's the truth.
How's the race to catch up with the piigs going Bill English?...oh sorry you're still on holiday.
Oh well it'll be back to the future soon cos the fools in the Beehive are about to return and get down to 'governing'...yes it's 2012 and they haven't started yet...gotta wait for the euro farce to play out and to see how many banks go under.
Two options on the Cabinet table folks...number one is to tell bigger lies to us....number two is to employ others to tell bigger lies to us.
Meanwhile on the Terrace the bankers man is keeping the cheaper for ever game going in the silly belief that the world of effluent money troubles will all come right. The banks continue to bleed the economy for their endless free run of fat profits on the back of created credit sold to morons across the country.
Must be about time to appoint another aging govt politician to a bank board..gotta keep the fools in the game.
Hey Bill...some fool is building  a new house in better raise gst again...some life remains in the building sector...kill it Bill....!
Right then, now which state sector CEOs would like a big fat hefty pay rise this year....all you gotta do is trot out some BS along govt lines...oh you all want it....haha

Borrowing such big amount of money remains a big deal to most students. Whether they like it or not, stundets will be forced to reapply over and over gain to finish their courses with the help of the student loans. Article source: Bill may allow discharge of student loans in bankruptcy. I hope that the state will take action for this finnacial problem. Government statistics say that more than 25 percent of individuals with student loans have payments that are past due. If this will continue, tudents will juust make the banks richer than ever. The intrest is getting higher and higher each year. The state should act for this soon.

You think it is hard here, my daughter and her husband have both just graduated in the USA and have a combined dept of over US$500,000.

But they must be highly skilled. Doctors perhaps ?

He is a doctor but still has 3 years of residency to do, during this he will get paid US$50,000 a year. In total 11 years of study.  My daughter was already a lawyer but wants to run for office so has been at Harvard for 2 years taking a Masters of Public Service degree(she has had 9 years of study).  She now works for a Think Tank as a Nuclear expert at about 30% of what she would earn as a lawyer.  Remember over there you have to have a BA first before you go to Law school or Med School.
The intersting thing about the USA system is that every year of Public service writes off some of the loan,  After 10 years it is completely written off,  maybe we need to look at that?

Maybe, the problem is it pushes ppl into public service, possibly to the detriment of other sectors. So with a debt like that say someone with a 1st rather than working in the private sector or starting their own company and being "productive" is a Govn employee.
Now for some occupations such as a doctor I dont see it as a biggee..
However I think for say Malaysia you do 5 years in public service to pay back your overseas studies, which is more reaqsonable a period.  So in some ways its good, but it is open to abuse, for instance in Cuba you can become a doctor but the state reserves the right to send you anywhere they want to earn foreign currency....that could include war zones etc. 
How would you feel if the US Govn said your child is off the afganistan or iraq for 5 years?

Its still a huge debt.....a frightening amount really.
and you have to ask given teh future if it will ever be paid back...

Your access to our unique content is free - always has been. But ad revenues are diving so we need your direct support.

Become a supporter

Thanks, I'm already a supporter.